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This policy contains the guidelines for granting and administering internal loans to departments or schools from Dartmouth's central funds.
An internal loan provides an alternate source of funding for capital renovations or acquisitions of equipment when other financing sources are not available. Generally it is expected that a department, division or school will look to its reserves as a primary source of financing purchases that are not covered by its annual operating budget. In certain cases, fundraising or external debt may be available for these purchases (see Prerequisite section below).
An internal loan is analogous to a bank loan except that Dartmouth (central) is advancing money to one of its departments. A department borrows from Dartmouth's working capital and pays this debt back, with interest, over a fixed period of time through monthly charges to its operating account.
There are three types of internal loans: 1) standard, 2) capital construction/renovation, and 3) nonstandard. Standard and capital construction/renovation internal loan policies and terms are described below. Loan requests differing from those described below are considered non-standard loans and must be approved by the Vice President for Finance (VPF) with amount, term, interest rate, and debt service payment determined on a case by case basis; however, the principles set forth herein will generally apply to non-standard loans.
All internal loans must be approved before the asset is purchased or the capital construction/renovation begins.
Loan Amount:
The term cannot exceed the depreciable useful life of the equipment or renovation being financed or 5 years, whichever is less.
The interest rate is fixed for the life of the loan. The rate is based on the Treasury Constant Maturity (TCM) rate for a comparable term plus 1.25% (125 basis points). Rates are calculated twice a year (July and January), and are based on the prior 6 month daily average. The TCM benchmark rates can be found at: https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15
Any request to waive interest charges must be approved by the VPF.
Note: For A-21 compliance purposes, the interest on service center loans must be charged to a non-service center chartstring of the school/division/department that sponsors the service center.
Debt Service Payment:
Request and Approval Process:
Loan Setup Process:
Loan Amount:
The term will be determined based on the individual project being financed.
The interest rate is fixed for the life of the loan. The rate is based on the Treasury Constant Maturity (TCM) rate for a comparable term plus 1.25% (125 basis points). Rates are calculated twice a year (July and January), and are based on the prior 6 month daily average. The TCM benchmark rates can be found at: https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15
Any request to waive interest charges must be approved by the VPF.
Debt Service Payment:
Loan Approval Process:
The decision to grant an internal loan needs to be made by the EVP and VPF before the project begins.
Loan Setup Process:
Michael Wagner, Chief Financial Officer